Our rural clients in Mackay can earn credits through procedures they may already be undertaking or that can be easily implemented into their farming structures. Popular projects through which credits are earned for farmers include storing carbon in soil, planting native trees and shrubs, managing stock in a way that allows native forests to regrow, or reducing methane through beef herd improvement. In addition to earning carbon credits, the quality of their produce and stock improves and greater water and soil efficiency is achieved. Credits earned can then be sold or traded in the investment market. Clients may also enter into contracts directly with companies to provide carbon credits over a designated period. The cost of acquiring credits is tax deductible under normal income tax assessment rules, and any income earned by selling credits is assessable income for the financial year in which they are sold.
In the simplest of terms, clients can earn credits by:-
- Choosing an eligible earning project;
- Registering the project with the regulating authority;
- Implementing the project; and
- Reporting the project and claiming the credits from the regulator.
It is then a matter of choosing the method of capitalisation that best suits the wishes and needs of the client.
An overview of the relevant legislation.
The Fine Print
The Carbon Credits (Carbon Farming Initiative) Act 2011 (the Act) introduces a scheme for the issue of Australian Carbon Credit Units (ACCUs) in relation to eligible offsets projects. The object of the Act is to create an incentive for people to engage in these projects to increase carbon abatement order to meet Australia’s obligations under international agreements.
Eligible offsets projects are declared as such by the Clean Energy Regulator (the Regulator) – an application is made under s 22 of the Act. After consideration, the Regulator may declare the project an eligible offsets project under s 27, provided they are satisfied of the requirements under sub-s (4), including that the applicant passes a fit and proper person test under s 60. The types of projects are set out in pt 3 div 12. Crediting periods are set out in pt 5 and reporting requirements are set out in pt 6.
Under s 11 of the Act, ACCUs can only be issued for a project if the person holds a certificate of entitlement and has an account with the Australian National Registry of Emissions Units. A person may apply to the Regulator at the end of the reporting period for the project for a certificate of entitlement under s 12. The Regulator may issue the certificate under s 15 provided they are satisfied of the requirements set out in sub-s (2). The certificate will set out the number of ACCUs and the account number into which they are to be deposited. Specific provisions for the calculation of ACCU entitlements are provided for in ss 16 and 18 of the Act, however the number of ACCUs ordinarily reflects the number of tonnes of carbon abatement achieved by the project.
